Statement of Concerns regarding the jurisdictional issues arising in the European Commission’s position in relation to the Illumina/GRAIL transaction

Foreword to the Statement of Concerns

“We were requested by Illumina, Inc. to review the serious jurisdictional issues arising from the European Commission’s assertion of jurisdiction over Illumina’s acquisition of GRAIL, Inc. That acquisition did not trigger the merger review thresholds in the EU or in any member state, yet was called in for Commission review under a new interpretation of Article 22 of the EUMR. In this respect, we drafted a Statement of Concerns, and then conferred with a range of very experienced individuals who formerly held domestic and international leadership positions in competition law and policy. Some of those individuals provided us with constructive input in relation to the Statement of Concerns, which has now been finalized, as set out below.

We note that none of the signatories to the Statement of Concerns have received any compensation or other financial incentive from Illumina, Inc. or GRAIL, Inc., and have no other relationship with those companies. This unique Statement of Concerns reflects the widely held view of distinguished individuals from various jurisdictions who are very experienced in competition law and policy that the European Commission’s assertion of jurisdiction in this matter is inconsistent with fundamental principles of jurisdiction, including principles of international law and international recommendations made unanimously at the OECD and the ICN. Legal certainty on principles of jurisdiction is of fundamental importance for merger control cases, both for competition authorities and for the private sector.”

Statement of Concerns regarding the jurisdictional issues arising in the European Commission’s position in relation to the Illumina/GRAIL transaction

The European Commission’s (the “EC’s”) recent assertion of jurisdiction over a United States- based merger that falls below the filing obligations of the EC and each and every European Union (“EU”) Member State threatens to subject transactions with no material connection to European commerce to merger control by the EC. This decision creates significant confusion and uncertainty regarding when the EC can and will exercise jurisdiction. These developments, which arise in the context of the new EC interpretation of Article 22 of the EU Merger Regulation (the “EUMR’”), ultimately undermine both the ability of non-EU competition authorities to properly exercise jurisdiction, including their ability to conduct full reviews of proposed or completed transactions with a material nexus to their own markets as well principles of comity. The EC’s assertion of jurisdiction in this manner is also out of step with public international law and the European Court of Justice’s (the “ECJ’s”) own legal standard for exercising extraterritorial jurisdiction. It is also out of step with international best practices as reflected in recent recommendations which were unanimously supported by members of the International Competition Network (the “ICN”) and the principles reflected by the Organization for Economic Cooperation and Development (the “OECD”) Competition Committee in its 2016 roundtable regarding jurisdiction nexus in merger control, discussed below. The EC’s assertion of extraterritorial jurisdiction in this manner has implications far beyond the individual case. In so doing, the EC assumes the role of global merger control enforcer even for mergers with at best speculative effects in the EU. This opens the door to a plethora of conflicting legal issues with a number of other jurisdictions, introduces uncertainty and unnecessary frictions into international merger control, and undermines the fundamental purpose of international competition law and policy organizations such as the ICN and the OECD Competition Committee.

On September 21, 2020, Illumina, Inc. (“Illumina”), announced its proposed acquisition of GRAIL, Inc. (“GRAIL”) (the “Transaction”). Illumina and GRAIL are both United States companies, headquartered outside of Europe. GRAIL is a start-up with no operations or presence in the EU or the European Economic Area (the “EEA”) (including no customers, contracts, or revenues in any EU Member State/EEA State) and has no plans to expand into the EU or EEA in the foreseeable future, according to the companies. Illumina is a provider of DNA sequencing technology, which is used for multi-cancer early detection tests, among other applications. [1]

On March 30, 2021, in the course of its antitrust review, the United States Federal Trade Commission (the “FTC”) filed an administrative complaint and requested an order to block the Transaction. On September 1, 2022, the FTC’s Chief Administrative Law Judge (the “ALJ”) dismissed the antitrust charges in the complaint brought by the FTC. On April 3, 2023, the FTC reversed the decision of the ALJ and ordered Illumina to divest GRAIL. Illumina has appealed the FTC’s decision to the Fifth Circuit Court of Appeals, which granted expedited treatment of the appeal and set a hearing for September 12, 2023.

An antitrust review was also initiated in the EU in parallel with the FTC’s antitrust review, even though the Transaction falls below the merger review thresholds of the EUMR and below the merger review thresholds of every individual EU Member State. On February 19, 2021, close to five months after the announcement of the transaction, the EC issued a letter inviting Member States of the EU and the European Economic Area to submit a referral request under Article 22(1) of the EUMR (“Art. 22”). [2]

On March 26, 2021, after issuing this letter to EU/EEA Member States, the EC published new guidance, confirming the reversal of more than thirty years of interpretation of Art. 22 (the “Art. 22 Guidance”). The Art. 22 Guidance encourages national competition authorities to use Art. 22 to refer transactions to the EC that do not meet national merger control thresholds, but which they believe may threaten to significantly affect competition within the EU.

France’s national competition authority accepted the EC’s invitation and made a referral of the Illumina/GRAIL merger under Art. 22. The national competition authorities of five other EU/ EEA countries joined that request (Belgium, the Netherlands, Greece, Iceland and Norway). On April 19, 2021, the EC accepted the referral request (the “Art. 22 Decision”). On April 28, 2021, following unsuccessful preliminary challenges in France and the Netherlands, Illumina appealed the Art. 22 Decision to the General Court (the “GC”). On July 13, 2022, the GC dismissed Illumina’s application (the “GC Art. 22 Judgment”), and, in so doing, validated the EC’s reinterpretation of Art. 22. Illumina is now appealing the GC Art. 22 Judgment in the ECJ (the “ECJ Art. 22 Appeal”). The ECJ Art. 22 Appeal focuses on, among other things, whether Art. 22 allows for the referral by national competition authorities to the EC of mergers that do not meet merger control thresholds established under their national laws and, if so, whether the EC lawfully applied these powers to the Illumina/GRAIL transaction.

During the pendency of Illumina’s appeal to the GC, Illumina and GRAIL proceeded to close the Transaction in August 2021, immediately implementing hold separate arrangements to ensure that Illumina and GRAIL would remain separate undertakings until the resolution of the case before the EC. On September 6, 2022, the EC announced the Transaction was prohibited under the EUMR (the “Merits Decision”). The EC based its assertion of jurisdiction on alleged global vertical foreclosure effects that could eventually be caused by the Transaction. Illumina has filed in the GC an application for annulment of the Merits Decision (the “Merits Appeal”). The Merits Appeal focuses on, among other things, whether the Transaction would stifle innovation and reduce choice in the market, and whether the speculative global vertical foreclosure effects asserted by the EC were sufficient to give it jurisdiction to review the Transaction, under the ECJ’s standard for extraterritoriality. [3]

The GC Art. 22 Decision and the Merits Decision confirmed that, pending the ECJ’s ultimate determination of the matter, transactions previously expected not to be subject to merger control review in the EU (as they do not have a “union dimension” as required under the EUMR and no Member States have jurisdiction under applicable national merger control laws) may lawfully be referred to the EC for consideration pursuant to Art. 22 of the EUMR and prohibited. These decisions disregarded the EUMR’s longstanding bright-line jurisdictional rules and introduced substantial uncertainty into whether a given transaction may be subject to merger control in the EU.

These decisions opened the door for the EC to assert jurisdiction over any transaction being implemented anywhere in the world, on the basis of speculative vertical foreclosure that could possibly have effects in the EEA many years in the future – essentially making the EC a global antitrust enforcement agency. Allowing the EC to assert jurisdiction in this manner appears to violate established principles of public international law, is disruptive, creates unnecessary system frictions at the international level, disregards fundamental comity principles and gives rise to a dangerous precedent for international cooperation and business planning going forward. These decisions are contrary to established international case law in the EU, the United States and Canada that expressly recognizes these principles. Moreover, these decisions are contrary to the recent recommendations of the ICN and the OECD Competition Committee, which were both supported unanimously by their members, as discussed below. Legal certainty on principles of jurisdiction is of fundamental importance for merger control cases, both for competition authorities and for the private sector.

I. Incompatibility with ECJ case law on extraterritorial jurisdiction

1. General

The EC’s assertion of jurisdiction over the Illumina/GRAIL transaction is contrary to established EU and international law as it fails to properly apply the leading case principles, as set out in Gencor [4], Intel, [5]and Wood Pulp, [6] which recognise jurisdictional principles in the EU that are grounded in public international law and consistent with similar principles followed in many jurisdictions including France, Germany, Italy, and the United States. Essentially, we believe that the EC errs in the consideration of the “qualified effects” test which provides that extraterritorial jurisdiction should not be exercised unless the effects in the EU of the conduct abroad are “immediate, substantial, and foreseeable.” [7] This jurisdictional assessment is a fundamental step that the EC refused to carry out. [8]

2. Theory of harm

In this case, the EC’s theory of harm, which relies on possible vertical foreclosure effects, is highly speculative, as a substantial and immediate impact on competition could only result from future, as yet undetermined, conduct of the post-merger entity. In such circumstances, it is not foreseeable (i.e., probable) that the transaction would have an immediate and substantial impact on the structure of competition in the EEA. [9] Therefore, the EC also appears not to have followed the ECJ’s holding in Intel that the foreseeability requirement refers to “probable” effects. Moreover, the EC failed to address whether any alleged effects would meet the requirement of being “immediate.” [10]

The test for jurisdiction relied upon by the EC in this case does also not meet the “material local nexus” requirements which are recommended by international best practices to provide guidance for the practical application of the public international law effects test and eschews the certainty provided by a turnover based threshold.

II. Incompatibility with ICN and OECD recommended standards

The ICN’s 2018 Recommended Practices for Merger Notification and Review Procedures recommend that competition authorities only assert jurisdiction over “transactions that have a material nexus to the reviewing jurisdiction.” [11] Such material nexus “should be based on activities within that jurisdiction as measured by reference to the activities of at least two parties to the transaction in the local territory and/or by reference to the activities of the acquired business in the jurisdiction.” [12] These recommendations were supported by all members, including the EC.

Similar principles were reflected in the executive summary of the discussion at the 2016 OECD roundtable regarding jurisdictional nexus in merger control. [13] This executive summary reflected the views expressed by members of the OECD Competition Committee that participated in this roundtable. Notably, during this roundtable, the EC itself indicated that it would review transactions only if they have substantial economic links with the EU and urged other countries to follow this same approach. [14] However, in asserting jurisdiction over the Transaction, the EC failed to apply the OECD’s and ICN’s recommendations pertaining to the essential requirement of a material jurisdictional nexus.

Most recently, in 2021, the OECD and ICN released a joint paper discussing international co- operation in competition enforcement. [15] This further emphasizes that these two international bodies are acutely interested in and focused upon issues of comity and international co-operation – issues which the EC also historically supported, but which are shown no consideration in the EC’s assertion of jurisdiction over the Transaction.

III. Comparative law : US jurisprudence

There have also been a number of leading cases arising in a United States-Canada bilateral context, which emphasize the importance of requiring a material local nexus to assert jurisdiction, including the decision of the United States Supreme Court in F. Hoffmann-La Roche, Ltd. v. Empagran [16] and the more recent decision of the United States Seventh Circuit court in Minn-Chem Inc. v. Agrium Inc. [17] The requirement of establishing a material local nexus is also reflected in domestic Canadian jurisprudence. [18]

IV. Conclusions

The EC’s assertion of jurisdiction in the Illumina/GRAIL matter is inconsistent with fundamental principles regarding jurisdiction of both international law and international recommendations made unanimously by members of the OECD Competition Committee and members of the ICN.

We, the signatories of this document, who have held domestic and international leadership positions with respect to competition law and policy are very concerned by this development.


We are hereby confirming that we support this Statement of Concerns as signatories thereto, this 7th day of September 2023 :

George Addy, Commissioner of Competition (1993-1996) of the Competition Bureau of Canada ; Partner (2002-2020) and Counsel (2020-2022), Davies Ward Phillips & Vineberg LLP

Professor Dr. iuris. Dr. rer. pol. h.c. Carl Baudenbacher, President (2013-2017) of the European Free Trade Association (EFTA) Court

Dr. Mark Berry, Chair (2009-2019) of the Commerce Commission of New Zealand

Jochen Burrichter, Partner (1977-2016), Hengeler Mueller ; Board Member (1988-2006) of the Studienvereinigung Kartellrecht e.V

Professor José Luis da Cruz Vilaça, President (1989-1995) of the Court of the First Instance of the European Communities ; Judge (2012-2018) of the Court of Justice of the European Union ; Advocate General (1986-1989) of the Court of Justice of the European Union

Konrad von Finckenstein, C.M., K.C., Commissioner of Competition (1997-2003) of the Competition Bureau of Canada ; Judge (2003-2007) of the Federal Court of Canada ; Chair (2001-2003) of the Steering Group of the International Competition Network

Dr. Geeta Gouri, Executive Member (2009-2014) of the Competition Commission of India

Eduardo Pérez Motta, President (2004-2013) of the Federal Competition Commission of Mexico ; Chair (2012-2013) of the Steering Group of the International Competition Network

Dr. Klemen Podobnik, President (2005-2011) of the Expert Council of the Slovenian Consumer Protection Agency ; Associate Professor at the University of Ljubljana

Professor Carlos Ragazzo, Commissioner (2008-2012) of the Administrative Council for Economic Defense (CADE) ; General Superintendent (2012-2014) of the Administrative Council for Economic Defense (CADE), Brazil

Dr. iuris. h.c Bo Vesterdorf, President (1998-2007) of the Court of First Instance of the European Communities ; Judge (1989-1998) of the Court of First Instance of the European Communities

Howard Wetston, C.M., K.C., Commissioner of Competition (1989-1993) of the Competition Bureau of Canada ; Judge (1993-1999) of the Federal Court of Canada ; Senator (2016-2022) in the Parliament of Canada


[1GRAIL is a maker of a unique non-invasive, early detection liquid biopsy test that can screen for multiple types of cancer in asymptomatic patients at very early stages using DNA sequencing. GRAIL was founded by Illumina in 2016 and was spun out as a standalone company, powered by Illumina’s NGS technology, to develop state-of- the-art data science and machine learning and create the atlas of cancer signals in the blood, enabling multi-cancer early detection tests. Illumina is one of several providers of DNA sequencing that are viable for this multi-cancer early detection, or MCED, tests. Prior to the Transaction, Illumina had a 14.5% interest in GRAIL.

[2Article 22 of the EUMR authorizes a Member State to “request the [EC] to examine any concentration . . . that does not have a community dimension . . . but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request.” Generally, the Member State is required to make any such request within fifteen working days of the transaction being “made known” to the Member State to ensure that the parties learn promptly that the EC will review the transaction. Article 22 was meant to enable the EC to review transactions where a requesting Member State had not yet enacted a merger review regime, and later, was also used to enable the EC to review transactions affecting multiple Member States (where a cross-jurisdictional perspective and consistent outcome are important). It was never meant to create jurisdiction where the requesting Member State has a merger regime, but the Member State legislature determined that the particular transaction should not be subject to merger review under its regime.

[3While the Merits Appeal is pending, in October 2021 the EC adopted a Statement of Objections outlining measures to unwind the Transaction, and ordered that GRAIL be held separate until the divestment is completed. Illumina and GRAIL have applied for annulment of these interim measures which are pending before the GC in separate proceedings.

[4In Gencor v. Commission (case T-102/96, EU:T:1999:65), the court found that the merger had a “Community dimension” based on each entity’s EU turnover and that the merger was thus subject to EC review under the EUMR. The court nonetheless went on to assess the “[c]ompatibility of the contested decision with public international law,” and applied the effects principle, finding that the EC could only review the merger if it had “immediate, substantial and foreseeable effect” on the common market. That standard was met in that case because the merging companies competed for the sale of their products in the EU, each had annual revenues in the EU of at least hundreds of millions of European Currency Units, and the merger would have eliminated that pre-existing competition.

[5Intel v. Commission, case C-413/14 P, EU:C:2017:632. In this case, Intel argued that the EC lacked territorial jurisdiction over Intel’s agreements with its trade partners (which were concluded in China and involved non-EU companies, and the products in question were sold outside the EU). The ECJ applied the effects principle and held that “the qualified effects test allows the application of EU competition law to be justified under public international law when it is foreseeable that the conduct in question will have an immediate and substantial effect in the [EU].”The ECJ found the test satisfied in that case because“Intel’s conduct (. . .) formed part of an overall strategy intended to ensure that no Lenovo notebook equipped with an AMD CPU would be available on the market, including in the EEA [and] that Intel’s conduct was capable of producing an immediate effect in the EEA.”

[6See Ahlström and Others v. Commission (“Wood Pulp”), joined cases 89/85, 104/85, 114/85, 116/85, 117/85 and 125/85 to 129/85), EU:C:1988:447.

[7Building on the Wood Pulp case, as set out in Gencor and Intel, where the implemen- tation test is not met (i.e., the transaction was not implemented in the EU), it is only where the effects of the conduct alleged by the EC are “immediate, substantial and foreseeable”that jurisdiction under EU law can be asserted against affected parties.

[8In order for a referral to be made to the EC pursuant to Art 22(1) EUMR, a referring Member State(s) is/are required to demonstrate that the concentration in question would affect trade between Member States and threaten to significantly affect compe- tition within the territory of the RC(s), based on a preliminary analysis, and without prejudice to the outcome of a full investigation.

[9As the transaction is a vertical—rather than horizontal—merger, the structure of competition will not be immediately altered by removing a competitor. As such, it is not foreseeable that the transaction would have an immediate and substantial impact on the structure of competition in the EEA, and there is no basis for assuming immediate foreclosure. To paraphrase Gencor, the decisions that the merged entity“may or may not take in the future” to adopt and implement the input foreclosure strategies hypothesized by the EC are not sufficient to pass the qualified effects test, particularly where the alleged conduct which it might engage in“in the near or more distant future” might or might not be“controlled by means of [Article 102 TFEU]”.

[10The effects of the transaction, instead of being immediate or foreseeable, would depend on further strategic choices that Illumina might (or might not) make in the future.

[112018 ICN Recommended Practices, at Section II, A. The genesis of the ICN arose over twenty years ago from a growing consensus among competition authorities and competition counsel in the private sector of the fundamental importance of developing recommended principles applicable to transborder merger reviews, including assertion of jurisdiction. One of the catalysts for the formation of the ICN was the Final Report of the International Competition Policy Advisory Committee to the Attorney General of the United States of America and Assistant Attorney General for Antitrust, delivered on February 28, 2000 (co-chaired by James F. Rill and Paula Stern), which conducted a thorough study of multijurisdictional mergers and international enforcement co-operation with a view to improving approaches both within the United States and around the world in those respects. Chapter 3 of that Final Report reflects best practices that recommended each jurisdiction’s merger review regime examine only those mergers that have a nexus to and the potential to create appreciable anticompetitive effects within that jurisdiction. A second catalyst for the formation of the ICN arose from the GE/Honeywell transborder merger case, which in 2001 saw the US and Canadian competition authorities conclude that no remedial action was required in a US-based proposed merger, whereas the EC issued a full remedial order. These catalysts led to the formation of the ICN and its Merger Working Group, which then involved input and discussion among ICN members over a good number of years that led to the 2018 ICN Recommendations, which were supported by all members of the ICN, including the US and the EC.

[122018 ICN Recommended Practices, at Section II, C.

[13Executive Summary of 2016 OECD Roundtable – Jurisdictional Nexus in Merger Con- trol Regimes, er-control-regimes.htm. The executive summary indicated that“notification thresholds must have an appropriate local nexus, be clear and objective, and be easy to use and to comply with” and that “local nexus is vital to a well-functioning merger control system that achieves an appropriate balance of costs and benefits.”The executive summary also highlighted that the main factor usually taken into account to determine whether a transaction has appropriate local nexus is the local activity of the target or of each of at least two parties to the transaction, usually measured by reference to material sales or asset levels within the territory of the jurisdiction concerned. The executive summary went on to state that“if the local turnover of only one participating undertaking was sufficient to trigger merger notification, then a very significant number of merger transactions which have no or very little impact on competition in the country would have to be notified.”

[14European Union Presentation – Jurisdictional Nexus in Merger Control Regimes, gimes.htm.

[15OECD/ICN (2021), OECD/ICN, Report on International Co-operation in Compe- tition Enforcement, tional-cooperation-in-competition- enforcement-2021.htm.

[16In F. Hoffmann-La Roche, Ltd. v. Empagran S.A., 124 S. Ct. 2359 (2004), the Unit- ed States Supreme Court revisited the effects doctrine and clarified the scope of the Foreign Trade Antitrust Improvements Act (FTAIA) exception to the Sherman Act. In this case, the court noted that“courts have long held that application of our antitrust laws to foreign anticompetitive conduct is (. . .) reasonable, and hence consistent with principles of prescriptive comity, insofar as they reflect a legislative effort to redress domestic antitrust injury that foreign anticompetitive conduct has caused.”The court went on to hold that where conduct significantly and adversely affects both customers outside and within the United States, but the adverse foreign effect is independent of any adverse domestic effect, the FTAIA exception does not apply, and thus, neither does the Sherman Act, to a claim based solely on the foreign effect.

[17In Minn–Chem, Inc. v. Agrium Inc., 683 F.3d 845 (7th Cir. 2012), the Seventh Circuit court held that the term“direct”(with respect to“direct, substantial, and reasonably foreseeable effect”) requires that there be a“reasonably proximate causal nexus”be- tween the foreign conduct and domestic effect.

[18Specifically, where a merger does not exceed monetary notification thresholds in Cana- da, it cannot be reviewed unless the“real and substantial connection”test is satisfied— showing that there is an appropriate nexus to Canada.